Intel, AMD Earnings to Offer Guidance on PC, IT Spending

When Intel and AMD report their third-quarter earnings in a few day, the two companies, which are the leading suppliers of x86 processors for desktops, notebooks and servers, are expected to offer a glimpse of how the financial crisis and the U.S. credit crunch is likely to impact the entire IT industry. In addition, Intel and AMD are likely to discuss the impact of the new chip manufacturing that formed when AMD sold off its fabs earlier this month.

When Intel and Advanced Micro Devices, the two largest suppliers of x86 processors for PCs and servers, report their 2008 third-quarter financial results in a few days, industry watchers will be looking for signs of how those numbers will reflect the ongoing financial crisis and its impact on the IT industry in the coming months.

Intel will report its third-quarter results after the markets close on Oct. 14, with AMD to follow on Oct. 16. While it is still too soon to tell how the credit crunch in the United States and the financial crisis will play out, financial analysts have started to cut their forecasts for IT spending and PC sales, which could have an impact on what Intel and AMD report later this month and offer some insight into what the two companies will forecast for 2009.

"Our core assumption is that IT spending continues to decelerate and year-over-year growth on a global basis moves into negative territory in the fourth quarter before an inflection point is reached in mid-2009," Brian Alexander, an analyst with Raymond James, wrote in an Oct. 10 research note. "By geography, we assume that the U.S. declines in the low- to mid-single digits, Europe in the mid-single digits and Asia Pacific and Latin American grow in the mid-single digits."

In the past week, several reports have indicated that there are troubling signs for Intel, AMD and the entire semiconductor industry. On Oct. 9, iSuppli cut its overall revenue forecast for the industry, citing drops in consumer spending and the financial crisis.

While Intel and AMD closed their third-quarter sales periods before the U.S. and other stock markets began their downward slide in late September and early October, the forecasts that these two companies offer will tell a lot about demand for chips as well as all other types of IT equipment, including PCs and servers.

"Given recent job loss in the U.S. corporate market and likely job loss in Europe, corporations in these markets will buy fewer PCs during the coming year," Richard Gardner, an analyst with Citigroup Global Market, wrote in an Oct. 7 research note. "In addition, corporations tend to push out upgrades for remaining employees as corporate profit margins come under pressure."